Asia’s foreign reserves reach record high

Governments and central banks in Asia held a record-high level of U.S. treasuries and other foreign assets at the end of July.

Combined foreign reserves in Asian countries and regions excluding Japan and China reached $2.4 trillion at end-July, up 6% from a year earlier, according to data from central banks. Indonesia saw its reserves grow 15% in the past year. The pace of growth in the region has accelerated since the beginning of the year and foreign reserves have now grown sixfold from their levels during the 1997 Asian financial crisis.

With such high levels of foreign reserves, Asian economies and their monetary systems are in a good position to withstand financial shocks. But Asian economies are still vulnerable if Western countries continue to tighten their monetary policies. With foreign investors pouring money into Asian markets keen on their potential for high growth, some monetary authorities are selling local currencies and buying U.S. dollars. Asian governments are generally anxious to prevent any sharp appreciation of local currencies that would make their exports uncompetitive…